Markets

EAC steps up push for single financial market

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The East African Community is exploring the possibility of setting up a common stocks market. Photo/REUTERS

The East African Community has started a process to harmonise capital market regulations to ease the movement of money across national borders, making it easier for investors looking for expansion cash.

The secretariat said the first phase of the project to come up with a single financial market will be completed in the first quarter of 2014 with a World Bank grant of Sh1.28 billion.

This is expected to lay the ground for the second five-year phase which seeks to give the region its common stock exchange.

Apart from creating a single stock exchange for the region, the project will come up with common regulatory and accounting frameworks, allowing investors to operate with ease in the five member countries.

“A single platform for equity capital should theoretically make it possible for corporates to raise cheaper or less expensive capital from the widening and deepening pool of capital,” Mr Chris Mwebesa, the managing director CfC Stanbic Financial Services told the Business Daily on Tuesday.

Apart from harmonising financial market laws, the governments are also expected to use the project’s implementation period to integrate their financial market infrastructure, develop national bond markets and sign mutual recognition of supervisory agencies, allowing national regulators to recognise players from all member states.

This means market intermediaries will be able to freely extend services to pursue clients’ deals into any of five member countries.

Investors will also enjoy region-wide subscription of issued securities.

This is in contrast to the current situation where Kenyan companies have to cross-list on other regional exchanges, a trend that Mr Mwebesa says is only good for visibility and marketing purposes since none of the current cross-listings raised any new capital in secondary listing.

“The process for trading cross-listed securities is cumbersome and drawn out. In essence, investors across the region will now have access to a larger pool of investible securities,” said Mr Mwebesa.

Mr Alloys Mutabingwa, EAC Deputy Secretary General in charge of Planning and Infrastructure said the harmonisation of the East African financial services sector will remove barriers to the free movement of capital across the national borders.

Mr Mutabingwa said citizens had a lot to gain by listing and trading on the envisaged East African Stock Exchange, laying a stronger foundation for the establishment of a monetary union and single currency.

The region launched its common market in July last year in the hope of allowing factors of production such as capital to move freely across the borders but failure to harmonise capital market rules has dimmed hopes of the private sector.

Players say Rwanda and Burundi need more time to develop and link their capital markets with their neighbours.

“A strong regional financial sector is needed to underpin an effective common market,” said Mr John Murray McIntire. the bank’s Country Director for Tanzania, Uganda and Burundi said when he signed the grant with EAC officials last week.

In Kenya, however, the renewed campaign at the EAC secretariat is a source of excitement to players who have been pushing for common standards and rules for the region’s financial sector to make transfer of funds and securities across borders quick, easy, secure and cost effective.

Lucas Otieno, the executive director at African Alliance, said Kenyans have been pushing for the convergence for a long time, even managing to bring Tanzania and Uganda on board as members of the country’s CDSC but that the conflicting national regulations have slowed down the process.

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